SWA raises fares, most airlines match.

[YourPilotFriend]

NEW YORK, Nov 27 (Reuters) - Southwest Airlines Co. (LUV.N: Quote, Profile, Research), the leading U.S. discount carrier, raised airfares as much as $10 one way over the Thanksgiving Day weekend, a company spokeswoman said on Monday.
The increase, which comes a few weeks after a broader increase by traditional carriers, marks the fifth price hike from the low-cost carrier this year, with the last coming in June. The fare boost comes as Southwest faces rising fuel and labor costs.






Let's keep them coming up. Another raise this year, and we will see a very profitable 2007 for the airlines.

 

[mynameisjim]

I laughed when everyone said "when SWA's fuel hedges run out, they'll be in trouble" I always knew when their fuel hedges started running out they'd raise fares.

 

[slaquer5]

I laughed when everyone said "when SWA's fuel hedges run out, they'll be in trouble" I always knew when their fuel hedges started running out they'd raise fares.

5 to 7 bucks a ticket is what the hedges are worth.

 

[YourPilotFriend]

I don't see why they still call it a low cost carrier. I think that's deceiving to the public, it should be called a major airline. Over the past few decades it has it has changed the face of aviation and forced every airline to meet its cost structure. Personally, I think it should be called what it really is now, a legacy carrier.

 

[slaquer5]

I don't see why they still call it a low cost carrier. I think that's deceiving to the public, it should be called a major airline. Over the past few decades it has it has changed the face of aviation and forced every airline to meet its cost structure. Personally, I think it should be called what it really is now, a legacy carrier.

I dont know how you can say that. The other airlines ONLY have the same price ticket on the routes we/they (LCC) fly. Look at the routes that they have no competition and notice what they charge.

 

[SWAdude]

I dont know how you can say that. The other airlines ONLY have the same price ticket on the routes we/they (LCC) fly. Look at the routes that they have no competition and notice what they charge.

Not only that, look at the walk up fares. SWA is typically a third of what the legacies charge.

 

[YourPilotFriend]

I dont know how you can say that. The other airlines ONLY have the same price ticket on the routes we/they (LCC) fly. Look at the routes that they have no competition and notice what they charge.

Why don't they charge the same as legacies would on those routes, wouldn't they make a lot more profit.

 

[SWAdude]

Why don't they charge the same as legacies would on those routes, wouldn't they make a lot more profit.

If it was that simple we would all be billionaires and airline financial geniuses.

 

[firstthird]

I think you're mixing terms. SWA is a "major" as defined by DOT, 1 billion in revenue a year I think. Of course, so is jetBlue and American Eagle. SWA isn't a 'legacy' since we don't trace our routes to the 1920's like the legacies do.

I agree that the terms are becoming less useful than in the past. Hub-and-spoke vs. semi-point-to-point might be more illustrative. Or Global vs. mainly domestic?

But I do agree that our 319 walk up fare still qualifies us as a LCC even if on many routes/seats our fare is the same or more than the legacies.

 

[acbarney]

United Airlines, which is owned by UAL Corp. (UAUA.O: Quote, Profile, Research), and American Airlines, which is owned by AMR Corp. (AMR.N: Quote, Profile, Research), said it matched Southwest's fare increase. Continental also said it matched the increase, which affects about 15 percent of its domestic markets.
Discount carrier JetBlue Airways Corp. (JBLU.O: Quote, Profile, Research) said it had not matched the increase.

SWA has controlled fares for the last several years. As their fuel price rises, they will raise fares to cover the additional costs. They will continue to hedge fuel into the future as long as it is profitable, this will keep their fare increase to a minimum. The first sign of the apocalypse for SWA will be when they raise fares and the above mentioned carriers don't. That will be at the point where costs have equalized, and the network carriers can operate these routes marginally profitably while earning higher yields on non-competing routes.

SWA can continue to operate profitably up to and until that point. To push that point off into the distant future is Gary Kelly's challenge. To make sure that point arrives sooner rather than later, or never, is the job of Kellner, Arpey, Tilton, and Parker.

 

[YourPilotFriend]

United Airlines, which is owned by UAL Corp. (UAUA.O: Quote, Profile, Research), and American Airlines, which is owned by AMR Corp. (AMR.N: Quote, Profile, Research), said it matched Southwest's fare increase. Continental also said it matched the increase, which affects about 15 percent of its domestic markets.
Discount carrier JetBlue Airways Corp. (JBLU.O: Quote, Profile, Research) said it had not matched the increase.

SWA has controlled fares for the last several years. As their fuel price rises, they will raise fares to cover the additional costs. They will continue to hedge fuel into the future as long as it is profitable, this will keep their fare increase to a minimum. The first sign of the apocalypse for SWA will be when they raise fares and the above mentioned carriers don't. That will be at the point where costs have equalized, and the network carriers can operate these routes marginally profitably while earning higher yields on non-competing routes.

SWA can continue to operate profitably up to and until that point. To push that point off into the distant future is Gary Kelly's challenge. To make sure that point arrives sooner rather than later, or never, is the job of Kellner, Arpey, Tilton, and Parker.

Yes but SWA would make a profit at that break even point for other airlines. What's interesting is, i'm pointing out the fact that price has no effect on capacity unless it is a major radical change. It appears the main deciding factor right now is brand loyalty. If it were true that price and service were the deciding factors, SWA would be in the red right now, since other airlines have the same prices and offer more services. If another airline tried to disrupt the service of another airline, it could spell that carriers doom. i.e. an add campaign against SWA, such as 50% discount for former SW FFers. SWa cost structure is so lean something like that would drive them into chapter 11 in 6 months.

 

[acbarney]

Yes but SWA would make a profit at that break even point for other airlines. What's interesting is, I'm pointing out the fact that price has no effect on capacity unless it is a major radical change. It appears the main deciding factor right now is brand loyalty. If it were true that price and service were the deciding factors, SWA would be in the red right now, since other airlines have the same prices and offer more services. If another airline tried to disrupt the service of another airline, it could spell that carriers doom. i.e. an add campaign against SWA, such as 50% discount for former SW FFers. SWa cost structure is so lean something like that would drive them into chapter 11 in 6 months.

Huh?

SWA will make a profit up to the crossover point. When/if SWA's costs continue to rise past that point, they will be in the same situation the Legacys have been in for the last several years, rising costs with no pricing power. Somethings got to give. GK must keep those costs from rising to and past the point of no return. Ironically his main problem will be the already low costs (it's hard to get blood from a stone.) The legacys did it primarily through the courts.

The brand loyalty thing is true to a certain extent, however most of SWA pax come from the leisure market and are completely price sensitive with no brand loyalty. They are used to shopping SWA for low prices and SWA continues to perpetuate the idea through advertising, even though they may not necessarily be the low price leader in some markets anymore. This was a smart marketing move by SWA. It's like people shopping at Walmart first without checking Target because they are used to finding the cheapest price at Walmart. Habits, good or bad, are hard to break. Target may have the same thing for the same price, but they make money by selling things that Walmart doesn't carry. However, as SWA continues to raise prices to cover rising costs, at some point those PAX will start checking other prices and jump ship in a heartbeat when the price is cheaper elsewhere (the crossover point).

Walmart just beats their employees and suppliers into submission to keep costs down. Hmmmmm.

I don't get what you're saying about disrupting another carriers business.

 

[B6Driver]

What am I missing?
LCC stands for Low Cost (as in operational costs) carrier; it has nothing to do with the price of the ticket that is charged to the public. It is inferred that a LCC "should" charge less for a similar ticket due to their lower over head compared to the Legacy carriers with only some what higher (now) costs. All carriers mentioned on this string are major airlines.
If the rules changed and I'm wrong; never mind.

 

[Whataburger]

If we're a Legacy, that that bump the other folks in to the HCC cagagory? High Cost Carriers.

 

[fngswa]

ACBARNEY-wrong on capacity is not effected unless it is a radical change. A difference of $1-3 dollars has a huge effect. People that anazlyze that from any airline will attest to that. There can be a big drop off with just a few dollar difference.

 

[scoreboard]

I laughed when everyone said "when SWA's fuel hedges run out, they'll be in trouble" I always knew when their fuel hedges started running out they'd raise fares.

Yep, were screwed, screwed I tell you, we raised fares to pay the bills.

 

[GuppyWN]

ACBarney..... where do I start? We fly one type of aircraft in a linear system. I can PROMISE you that the advantage SWA has over the hub and spoke legacies is more than you think. We wring more out of our aircraft and flight crews per day than anyone. By a lot.

Gup

 

[scoreboard]

Huh?

The legacys did it primarily through the courts.

.

What your failing to consider in your disertation is the fact that those legacy employees who have already been "beaten down by Walmart" will fight tooth and nail for every penny they sacrificed, and some. Legacies will raise prices to regain pay scales lost in bankruptcy.

 

[SWA/FO]

On November 27, 2006 a great man was quoted as saying on the record:

"When the fuel hedges run out....we are all doomed and I'm outta here!"

- the SWA/FO

 

[YourPilotFriend]

You guys don't have any high yield routes to make any money if you get in a fare war with other airlines. That's why I have said SWA will be chapter 11 by 2009. Here is an example, the NWA domestic fleet has about 450 airplanes and generates about $8 billion in revenue, these are low yield routes. In contrast our 16 747-400's bring in about $3 billion a year. The 787 program is expected to bring in at least $500 million a month in profit.

 

[scoreboard]

That's why I have said SWA will be chapter 11 by 2009.

Buddy, this is proof you have no idea...

 

[slaquer5]

You guys don't have any high yield routes to make any money if you get in a fare war with other airlines. That's why I have said SWA will be chapter 11 by 2009.

I agree except I think that it will be 1975 that SWA will be in Chapter 11. There is no way SWA can get into a fare war with the likes of Braniff and AA and come out alive.

 

[SWA/FO]

Here is an example, the NWA domestic fleet has about 450 airplanes and generates about $8 billion in revenue

get off the crack, they dont have that many airplanes.

Maybe Northwest can buy some of our airplanes off of us, after our bankrupcy filing. We will need some serious cash. Selling airplanes already paid for is a great way to generate cash.

SOUTHWEST AIRLINES Fleet:

Southwest currently operates 468 Boeing 737 jets (as of August 11, 2006).
Type Number
737-300 194
737-500 251
737-700 249

 

[YourPilotFriend]

get off the crack, they dont have that many airplanes.

Maybe Northwest can buy some of our airplanes off of us, after our bankrupcy filing. We will need some serious cash. Selling airplanes already paid for is a great way to generate cash.

SOUTHWEST AIRLINES Fleet:

Southwest currently operates 468 Boeing 737 jets (as of August 11, 2006).
Type Number
737-300 194
737-500 251
737-700 249

I'm counting the regional toys as well.

 

[Aplus9]

get off the crack, they dont have that many airplanes.

Maybe Northwest can buy some of our airplanes off of us, after our bankrupcy filing. We will need some serious cash. Selling airplanes already paid for is a great way to generate cash.

SOUTHWEST AIRLINES Fleet:

Southwest currently operates 468 Boeing 737 jets (as of August 11, 2006).
Type Number
737-300 194
737-500 251
737-700 249

Typo: only 25 737-500's

 

[slaquer5]

YPF if i was you I would be more concerned about AA taking over NWA and you being on the street. Last i checked AA is not ALPA and the AA guys feel that they gave TWA way to much.

 

[SWA/FO]

Yes.... only 25 -500. 251 would be a nightmare. I edited out the "seats" on board and forgot to take out the 1 (which was part of 122).

 

[Flopgut]

Just keep raising fares SWA! I'm glad you can and it helps us all.

I'm afraid it will be all too soon and the US traveling public (continuously mentally declining non-sophisticate gooons that they are) insist on Ryan Air type $3 airfares. That won't be fun.

 

[GuppyWN]

You guys don't have any high yield routes to make any money if you get in a fare war with other airlines. That's why I have said SWA will be chapter 11 by 2009. Here is an example, the NWA domestic fleet has about 450 airplanes and generates about $8 billion in revenue, these are low yield routes. In contrast our 16 747-400's bring in about $3 billion a year. The 787 program is expected to bring in at least $500 million a month in profit.

How myopic.

First of all, our hedges currently run through 2010. Secondly, our yield doesn't have to match XYZ because our costs are lower. Thirdly, do you think we went to Denver and Dulles for the hell of it? Think about it.

Gup

 

[UALfurloughee]

I am personally glad you went into Denver, as it takes the heat off of ual for dealing with Frontier. Think about that.

There sure is a lot of BS on this board - I guess we all have huge egos or we wouldn't fly big airplanes.

I for one am just happy to be flying again. I hope we all make it and our respective airlines are successful so that our wages can increase. The way to see that start happening is through fare increases like the one we see here. Keep it up Southwest!